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Profits at private banks have shrunk by more than a third over the past year due to the credit crisis, according to a survey. Total assets under management have also come under pressure, falling by 16% to $14.5 trillion last year, according to a survey of global private banks by consultancy Scorpio Partnership.

Sebastian Dovey, managing partner at Scorpio, said: “With asset levels declining and cost-income ratios rising, this will place huge strain on the models of many wealth managers.”

Cost-income ratios in the sector rose to 72% last year, from 64% in 2007.

The financial turmoil also led to a change in the private bank rankings, according to the survey, with Bank of America supplanting UBS as the world’s largest wealth manager. Bank of America acquired Merrill Lynch, previously the biggest wealth manager in the US, last year and now manages $1.5 trillion (€1.07 trillion) of assets in its wealth operations.

UBS, which has struggled to hold on to wealthy clients since problems emerged in its investment bank last year, lost around $500bn in assets under management, according to Scorpio. It now manages $1.3 trillion, making it the second biggest wealth manager globally.

Altogether, the top 20 global private banks manage around $9 trillion of private client assets, around 63% of the total market. Dovey said the figure challenges the widely held view that the industry is fragmented, but he added that rising cost-income ratios are increasing the appetite for acquisitions.

Despite feeling the squeeze, private banks are continuing to hire, with staff levels increasing by 6% last year. But Dovey said higher staff levels were not necessarily improving performance at private banks.

He said: “The ratio of firms that were hiring in 2008 versus those that were shedding private banking staff was four to one, but the net results of new assets to the business was not successful with a significant number of private client distribution channels performing well below industry standard.”